Big Players Are Zooming In On Kodak

The picture at Eastman Kodak these days seems peculiarly fuzzy, what with a new CFO, Chris Steffen, leading efforts to lift the company's unsteady profitability. But some big investors are quite clear on what they see: a new restructuring that will boost Kodak's stock.

Indeed, Kodak shares have not taken the downward spiral that shares of other large consumer-product companies--including Gillette and Coca-Cola--have experienced in recent months. The stock has been on the rise, trading near its 52-week high of 56 3/4 a share, up from 40 in late December.

What is behind this new optimism about the maker of photography products, drugs, chemicals, and imaging and information systems?

Whispers are that Kodak will break up its health-care business, which includes Sterling Drug, acquired in 1988 for $5.1 billion.

EUROPEAN SUITOR? One investment pro believes that as part of a restructuring, Kodak will sell Sterling's prescription-drug unit to a European company. The health group's total earnings came to $588 million, of which about $410 million was from the prescription-drug unit. Other Sterling Drug products include over-the-counter medicines and household products.

NatWest Securities analyst Nicholas Heymann, who is bullish on Kodak, says it's likely that the company will sell parts of its health-care business. Three European companies, he says, are interested in Sterling's prescription-drug unit: Hoffmann-La Roche, whose product portfolio, says Heymann, fits well with Sterling's; Bayer, which needs, he believes, a U. S. structure similar to Sterling's; and Areserond, a pharmaceutical company in Zurich, which Heyman believes is looking for an acquisition in the U. S.

As to Sterling's over-the-counter medicines, Heymann says interested companies include Pfizer, American Home Products, and Ciba-Geigy.

Encouraged by new restructuring efforts, Heymann is looking at a target of 70 for Kodak shares over the next 12 months. "We believe that 100 would be a realistic target by early 1995," Heymann says, "when the full extent of the company's efforts to improve shareholder value should become much more evident."

Analyst Alex Henderson at Prudential Securities says management is now well aware "that if it doesn't deliver on promises to boost earnings and the stock, the company's large shareholders will be out for a lynching." A Kodak spokesman declined comment.

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